Are you considering a payment processor for your business in Malaysia? While a payment processor is an excellent tool for quick and secure transaction processing, it is essential to understand its limitations.

This article explores what a payment processor is, how it functions, and why it’s crucial for your business. We will also discuss some drawbacks of relying solely on a payment processor, such as limited control of the checkout process and higher security risks. By the end of this article, you will better understand payment processors and why they are a vital tool for online businesses but may not be sufficient for all payment needs.

What is a Payment Processor

A payment processor is a financial system that manages the technical back-end processing of payment transactions. When a customer initiates a payment, the payment processor communicates with its connected bank to verify the payment details, authorize the transaction, and transfer the funds to the merchant’s account. Payment processors play a crucial role in ensuring that payment processing is both speedy and secure.

How is this different from a payment gateway? Check out our article, where we break down the differences between payment processors and payment gateways.

How does a payment processor work?

• Collect customers’ card details or bank information

• Verify that the transaction is valid and processable

• Authorize the payment and transfer the funds to the merchant’s account

The limitations of using only a payment processor

For most use cases in e-commerce, payment processing is a feature offered by the payment gateway, rather than a standalone service. This is for the following reasons:

Limited control over the checkout process

When using solely a payment processor, you may not have the flexibility to fully customize your checkout site and control your customers' payment experience. Hence, a payment gateway's front-end-specific features are pivotal to the users' checkout experience.

For example, a checkout flow with redirections and a non-branded design can lead to a negative customer experience, potentially resulting in a higher abandonment rate.

Security risks

Payment processors handle sensitive customer data like credit card information. Thus, relying on a single processor can instigate the risk of data breaches or hacking attempts. This vulnerability can damage your reputation and result in financial losses.

To mitigate these risks, businesses should adopt a payment gateway with more robust security measures that distribute the risk of processing payments. A payment gateway typically offers additional layers of protection for both customers and merchants, making it an excellent option for businesses that handle large volumes of sensitive customer data.

To learn more about security measures, check out our article on Protecting Merchants And Cardholders Against Fraudsters.

The most efficient payment solution for businesses

In Malaysia, where 82.3% of the population are tech-savvy and prefer a seamless online shopping experience, relying solely on a payment processor can limit a business’s ability to provide customers with a smooth payment process. To overcome these limitations, businesses often turn to a reliable payment gateway that offers an integrated payment processor as a part of their services.

In fact, a recent study shows that businesses using a payment gateway with an integrated payment processor achieved a transaction success rate of 84.1% compared to just 64.8% for those without one.

A payment gateway enhances the security of transactions and the efficiency of transaction data management. It also allows businesses to customize their checkout process and build a seamless and secure payment flow, meeting their customer’s expectations for a streamlined online shopping experience.

If you are keen to learn more about payment gateways, check out our article Payment Gateway 101: The Ultimate Guide For Malaysian Businesses.

While payment processors offer valuable payment processing capabilities, businesses should seek more comprehensive payment solutions. For businesses looking to optimize their checkout process, a payment gateway with an integrated payment processor is an excellent choice for you.

Opn Payments is a payment gateway that provides an integrated payment processor for thousands of businesses across Southeast Asia. Our local support team is also available to answer any further questions merchants in Malaysia may have. Contact us today to get the support you need in choosing the right solution for your checkout.